What the Rest of the EU Is Looking to Achieve After Brexit

Chief Client Relationships Officer
Responsible for the relationship with all our organization’s customers. I oversee the Customer Support and Customer Relationship Departments.

The United Kingdom has been the centre of attention following its shocking decision to leave the European Union (EU) on June 23. But very few have asked what the remaining 27 EU members are looking to achieve once the UK formally notifies Brussels of its intent to leave the bloc.

Several EU members, including Germany, Portugal and the Czech Republic, say that the UK must accept existing freedom of mobility rules in exchange for single-market access. According to Bloomberg, France may go even further than that and link mobility to the UK’s desire to keep so-called passport rights that allow banks to do business in the rest of the continent.[1]

Only three EU members – Denmark, Austria and Bulgaria – have shared the same concern with the UK over mobility.

For its part, the UK government has appointed David Davis as Secretary of State for Exiting the European Union, a new post that should help the Tories navigate what’s expected to be a highly contentious negotiation process. Davis has stated that the UK will probably invoke Article 50 of the EU Treaty before the end of the year, which gives London and Brussels two years to formalize a new trade agreement. When asked what the UK hopes to achieve with the talks, Davis identified “continued tariff-free access” as the “ideal outcome.”[2]

Based on the recent comments of EU member states, continued free trade access to the EU is far from guaranteed without significant concessions.

Martin Schulz, president of the European parliament, told reporters back in June that the EU wants the UK out of the bloc as soon as possible.[3] At that time, Britain’s ruling Conservative government was prepared to wait until October to appoint a new prime minister and get the ball rolling on Brexit. The Tories expedited the process by appointing Theresa May to Prime Minister last month.

The Bank of England (BOE) is already preparing for a long and arduous negotiation process that is expected to strain the British economy. The Bank’s Monetary Policy Committee (MPC) in August voted to lower interest rates for the first time since 2009 and expand the size of its bond purchase program by a combined £70 billion.[4] Central bank Governor Mark Carney has stated that additional stimulus measures are likely to follow.

However, MPC member Ian McCafferty recently wrote in an opinion piece that the central bank’s outlook isn’t as simple as unleashing more stimulus.

The BOE “faces a set of economic circumstances that make assessing the appropriate amount of policy stimulus more difficult,” McCafferty said. “I prefer to learn as we go.”[5]

With the exception of the British pound, UK assets have been surprisingly resilient post-Brexit, riding the wave of global optimism made possible only through more accommodative monetary policies from Sydney to London. The UK’s FTSE 100 Index is currently trading at its highest level in around 14 months, while Germany’s DAX recently entered into bull market territory.

In the United States, the major stock indexes have set consecutive records in July and August. In fact, the Dow Jones, S&P 500 and Nasdaq Composite each closed at record highs on August 11. That was the first time since 1999 that all three gauges reached a record on the same day.[6]

Forex.info is staffed by experienced financial industry experts dedicated and passionate about trading education and news. Our mission is to inform our readers of breaking market news, engage them with both data driven and entertaining articles, videos and media.

The information found on forex.info are intended only to be educational, is not advice nor a recommendation and thus should not be treated as such. We strongly recommend that you seek independent financial advice from a qualified and regulated professional, before participating or investing in any financial activities or services. Please be aware that trading derivative products on “margin” or with leverage, carries risk and may not be suited for everyone. Trading in these financial products can cause the loss of the entirety of your initial investment, please do not invest more than you can afford to lose. Opinions expressed at forex.info are those of the individual authors and do not necessarily represent the opinion of forex.info or its management.